By Amy Braun-Bostich, MSFP, CFP®, CFS®, APMA®, CLTC®
Approaching retirement is an exciting time, especially for educators. After decades of giving everything you have for students, colleagues, and your school, it’s finally time to put yourself first and focus on yourself. Yet with that excitement also comes uncertainty, as retirement isn’t something you’ve done before—and you want to make sure you get it right. As you prepare for the next stage of your life, here are five important things you need to do to ensure a successful and rewarding transition. If you follow these five tips and create a comprehensive retirement plan, you can confidently look forward to the next chapter of your life.
1. Review and Replace Benefits
It is important to review your workplace benefits before you retire to ensure if you’ll need any of the benefits you currently enjoy while in retirement. Your workplace benefits may include a pension plan, health insurance, life insurance, and other items that can help you in retirement. Knowing what benefits you are eligible for, how much you will receive, and when you will receive them will help you plan for the future.
It might be worth replacing some benefits you have, such as life insurance. For educators, it’s not uncommon to have a group life insurance policy through work, and then when you retire, all that life insurance goes away since you aren’t employed anymore. But is that really what’s best for your and your family? For a number of people it isn’t, which means you’ll need to determine the right amount of life insurance and then see if you can extend your group policy or purchase a private individual plan.
2. Create a Tax Plan
Tax planning is an essential part of your financial success, especially in retirement. While many investors focus on getting the highest return on their investments or in their savings accounts, you can also increase your bottom line by saving money on taxes.
One important but often overlooked piece of the tax puzzle is to understand the types of accounts in which your investments are allocated. For instance, many higher-education professionals have most of their money in pre-tax accounts, like a 403(b) or 457. What this means is that in retirement, when you want to make a distribution from that account, you’ll be forced to pay taxes on the amount you distribute. Whatever the tax rates are at that point, you’ll simply have to pay it.
If you want added flexibility on how to generate a retirement income, as well as the possibility to pay a lower tax rate, then you should focus on how to diversify your accounts. Working with a financial advisor can help you understand the optimal amount to have in taxable, tax-deferred, and tax-free accounts. Each of these types of accounts will offer different benefits and different tax rules, allowing you to effectively choose the most beneficial ones for you now and in retirement.
3. Determine Your Income Needs and Options
Just as you wouldn’t accept a job before knowing your salary, you also shouldn’t enter retirement without knowing how much income you’ll be able to generate. You should factor in how much you can distribute from your investment accounts, what you’ll receive from Social Security, and any pension benefits.
If you do have a pension, your employer might offer you the opportunity to annuitize it and get a guaranteed amount for life. While that may sound appealing, that typically isn’t the best choice. You’ll lose all control and choice over that asset, and oftentimes the offer doesn’t make much sense in terms of the numbers. Make sure to thoroughly review any offers you receive, and consider the help of an independent party to help you make the best decision.
4. Simplify Your Investments by Consolidating
It’s not uncommon for education professionals to work at a number of places throughout their decades of experience, thereby creating numerous investment accounts with each workplace. There simply isn’t much, if any, benefit to having numerous accounts scattered at different institutions.
To simplify your life and make your retirement planning easier, I typically recommend rolling over those accounts into as few accounts as possible. When done properly, there aren’t any tax implications for moving money from your workplace retirement account to an IRA. In addition, you’ll have more control and more investment options in the IRA than you would with your workplace account.
5. Avoid Unplanned Risk With Big-Picture Planning
Far too often, couples that I work with will have chosen their investments on an individual basis instead of looking at the big picture. One spouse might choose funds that are only U.S. funds, without knowing that their spouse also is only invested in the U.S. This results in an overall portfolio that isn’t fully diversified, and leaves them susceptible to unnecessary risk.
To mitigate that risk and diversify your portfolio, you need to look at how all your investment accounts are structured and plan from there.
Creating Your Ideal Retirement
Regardless of whether you want to retire this year or in the next five years, it’s essential to start planning. Following these five tips will improve your odds of creating your ideal retirement so you can finally enjoy all the fruits of your labor.
If you’d like help making sense of your retirement, I’d love to help. You can get started by scheduling a free 30-minute phone consultation or reaching out to us at email@example.com or 724.942.2639. And we also invite you to follow us on social media on Facebook, LinkedIn, and Twitter.
Amy Braun-Bostich is founder, CEO, and private wealth advisor at Braun-Bostich & Associates, a fee-based fiduciary wealth management firm located just outside Pittsburgh in Canonsburg, PA. With over 30 years of experience, Amy is dedicated to serving her high-net-worth pre-retiree and retiree clients, including medical and academic professionals, and next-generation accumulators, helping them transform their wealth through customized strategies and top-notch services so they can achieve their goals and receive a new vision of what’s possible. With a goal of adding value to the lives she touches; Amy approaches each client with compassion and transparency and prioritizes building lifelong relationships.Amy has invested countless hours into growing in her skills and knowledge to bring her clients the best advice possible for their situation. She earned a bachelor’s degree in Psychology from UCLA and also holds a Master of Science in Financial Planning (MSFP). She holds multiple certifications, including CERTIFIED FINANCIAL PLANNER™, Accredited Portfolio Management Advisor℠, Certified Fund Specialist®, and Certification for Long-Term Care. She was named one of Pennsylvania’s Top Women Wealth Advisors in Forbes’ 2022 Best-In-State list. When she’s not helping her clients find clarity and purpose, you can find Amy reading, going on walks, and gardening. She loves to travel and spend time with her family, including her husband, two children, and her dog. To learn more about Amy, connect with her on LinkedIn and Twitter.